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b.
labor market conditions.
c.
wage-rate surveys.
d.
an effective performance appraisal system.
ANSWER:
d
90. Jenna and Blake are both line workers at LennoCorp. This week, they each worked 40 hours. Jenna produced 76 units
this week, and Blake produced 69 units. They received identical wages. Jenna and Blake are compensated based on
a.
hourly work.
b.
piecework.
c.
skilled labor.
d.
competence.
ANSWER:
a
91. The measure of the average change in prices over time in a fixed “market basket” of goods and services is known as
a.
cost-of-living allowance.
b.
cost-of-living adjustment.
c.
the consumer price index.
d.
the inflation index.
ANSWER:
c
92. Clauses in labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on
changes in the consumer price index are known as
a.
maintenance clauses.
b.
escalator clauses.
c.
roll-up clauses.
d.
guarantee clauses.
ANSWER:
b
93. The most common cost-of-living adjustments are __________ percent per hour for each .3-point or .4-point change in
the consumer price index (CPI).
a.
1
b.
2
c.
3
d.
4
ANSWER:
a
94. For real wages to increase, which of the following must be true?
a.
An employee’s wage increase must be greater than the increase in the consumer price index (CPI).
b.
An employee must receive a lump-sum wage increase equal to the increase in the consumer price index
(CPI).
c.
An employee’s wage must simply increase without the influence of consumer price index (CPI).
d.
The consumer price index (CPI) must increase at least as much as the employee’s wage.
ANSWER:
a
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95. Jenna and Blake are both line workers at LennoCorp. This week, they each worked 40 hours. Jenna produced 83 units
this week, and Blake produced 71 units. Jenna received higher pay for the week than Blake did. Jenna and Blake are
compensated based on
a.
hourly work.
b.
piecework.
c.
skilled labor.
d.
competence.
ANSWER:
b
96. Job evaluation helps to establish
a.
job classifications.
b.
the organization’s ability to pay.
c.
internal equity.
d.
labor market conditions that affect pay.
ANSWER:
c
97. One potential disadvantage to the cost of living increases often negotiated by unions is that
a.
employees are not motivated to increase performance.
b.
employees are more likely to seek jobs at unionized organizations.
c.
employees are less likely to seek jobs at unionized organizations.
d.
it makes it harder to recruit new employees in a tight labor market.
ANSWER:
a
98. Which is the simplest and oldest method of job evaluation?
a.
Job worth system
b.
Job ranking system
c.
Job grade system
d.
Point system
ANSWER:
b
99. Which system of job evaluation are raters using when they take cards that list the duties and responsibilities of the job
and arrange them in order of the importance of the jobs?
a.
Point method
b.
Job ranking
c.
Job grade system
d.
Factor comparison method
ANSWER:
b
100. Which of the following is NOT a form of pay equity?
a.
Internal equity
b.
External equity
c.
Collective equity
d.
Individual equity
ANSWER:
c
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101. Which system of job evaluation is being used when jobs are grouped according to a series of predetermined wage
grades?
a.
Hay profile method
b.
Job ranking system
c.
Factor comparison method
d.
Job classification system
ANSWER:
d
102. Astrid is a clerk at LennoCorp, an entry level position. She consistently gets positive evaluations for her work. She
loves her job, and has no desire to be promoted into another position within the company. In this situation, her pay level
may be limited by
a.
the company’s ability to pay.
b.
her relative worth.
c.
the worth of the job.
d.
labor market conditions.
ANSWER:
c
103. Escalator clauses in employee contracts may actually reduce motivation for employees to improve performance
because
a.
the raises are not high enough to be meaningful.
b.
too many conditions must be met to receive raises.
c.
employees have to work too many hours.
d.
pay is unrelated to individual performance.
ANSWER:
d
104. A quantitative job evaluation procedure that determines a job’s relative value on the basis of quantitative assessments
of specific job elements is known as
a.
the point system.
b.
the job ranking system.
c.
the factor comparison method.
d.
the job grade system.
ANSWER:
a
105. The elements of a job such as fiscal accountability, leadership, and product accountability are referred to as
a.
job specifications.
b.
job classification factors.
c.
compensable factors.
d.
factor comparisons.
ANSWER:
c
106. Using the point method of job evaluation requires that managers
a.
employ either a standardized program or customize a point method to fit their particular jobs.
b.
compare the job descriptions against the various factor-degree descriptions.
c.
link point totals to the wage curve.
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d.
rank jobs by compensable factors.
ANSWER:
b
107. The relative worth of a job evaluated using the point manual is determined by
a.
benchmark jobs contained in the point manual.
b.
the wage mix.
c.
the number of steps within the pay grade.
d.
the total points that have been assigned to that job.
ANSWER:
d
108. The job evaluation system that seeks to measure a job’s worth through its value to the organization is known as the
a.
point method.
b.
job ranking system.
c.
work valuation system.
d.
Hay profile method.
ANSWER:
c
109. Which job evaluation system serves to direct compensation dollars to the type of work pivotal to organizational
goals?
a.
Point method
b.
Job ranking
c.
Work valuation
d.
Hay profile method
ANSWER:
c
110. The HR department at LennoCorp has been tasked with completing job evaluations of all positions to ensure that
wages are properly aligned. They will be using several different methods to complete this process. For which category of
jobs should they use the Hay profile method?
a.
Blue-collar jobs
b.
Entry level jobs
c.
Executive and managerial positions
d.
Jobs within a specific wage range
ANSWER:
c
111. The Hay profile method uses which three factors for evaluating jobs?
a.
Knowledge, skill, and responsibility
b.
Responsibility, mental ability, and skill
c.
Responsibility, knowledge, and mental ability
d.
Knowledge, accountability, and mental ability
ANSWER:
d
112. The employees at LennoCorp are meeting or exceeding their goals, and consistently get positive reviews. However,
competition has forced down prices on the goods LennoCorp produces, thereby reducing the firm’s income. In this
situation, pay levels may be limited by
a.
the employer’s ability to pay.
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b.
the employees’ relative worth.
c.
the employees’ motivation.
d.
the worth of the job.
ANSWER:
a
113. In conducting a wage and salary survey for office personnel, the relevant labor market to be surveyed is most likely
a.
regional.
b.
local.
c.
national.
d.
international
ANSWER:
b
114. In order for a wage increase to actually improve the recipient’s purchasing power and standard of living, it must
a.
be larger than the increase in the CPI.
b.
be regulated through an escalator clause.
c.
be a cost of living adjustment.
d.
be based on merit.
ANSWER:
a
115. The relationship between the relative worth of jobs and their wage rates can be represented by means of a
a.
regression line.
b.
wage survey.
c.
salary progression chart.
d.
wage curve.
ANSWER:
d
116. Employers wishing to encourage employees to accept a promotion to a job in a higher grade would
a.
increase the size of successive rate ranges.
b.
increase the point spread of pay grades.
c.
decrease the size of successive rate ranges.
d.
decrease the point spread of pay grades.
ANSWER:
a
117. Jobs that are grouped into the same pay grade should
a.
all receive the same wage rate in order to achieve equality.
b.
be paid within a range that does not overlap with bordering job grades so that distinctions between grades are
maintained.
c.
be paid within a range that may overlap with adjoining grades, so that an employee with experience can be
paid as much as or more than a newer employee in a higher grade.
d.
be paid at different wage rates because the worth of these jobs to the organization may differ.
ANSWER:
c
118. Red circle rates above the maximum for the range can result because
a.
promotional opportunities are plentiful.
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b.
employees have high seniority.
c.
employees are demoted.
d.
grades are added to the range.
ANSWER:
b
119. The predominant approach to employee compensation is
a.
pay-for-performance.
b.
competence-based pay.
c.
job-based pay.
d.
individual contract.
ANSWER:
c
120. Employees at LennoCorp often sign up for classes or additional training because such activities can lead to pay
raises, even when their actual job titles or positions do not change. This is an application of a
a.
competence-based pay plan.
b.
performance-based pay plan.
c.
merit-based pay plan.
d.
seniority-based pay plan.
ANSWER:
a
121. __________ is a pay system in which employees are paid according to the number of units they produce.
a.
Piecework
b.
Hourly work
c.
Non-exempt work
d.
Exempt work
ANSWER:
a
122. Senior management at LennoCorp wants a better understanding of the relationship between the values of the jobs at
the firm, as determined by their job evaluations, and the actual pay rate for each of those positions. The HR team can
provide this information graphically by using a
a.
pay grade.
b.
wage curve.
c.
point system.
d.
salary plot.
ANSWER:
b
123. Which of the following is NOT an internal factor affecting the pay mix?
a.
Worth of job
b.
Cost of living
c.
Employer’s ability to pay
d.
Employee’s relative worth
ANSWER:
b
124. The biggest challenge with competence-based pay is
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a.
encouraging employees to take advantage of it.
b.
reduction in organizational flexibility.
c.
loss of productivity.
d.
developing appropriate measures of skills and competencies.
ANSWER:
d
125. The new management at LennoCorp felt that the company had too many salary grades, making the compensation
system overly complex and encouraging an obsession with pay grade rather than skill development. They are collapsing
the salary grades into a few wide salary bands in a process known as
a.
red circling.
b.
broadbanding.
c.
pay ranging.
d.
factor comparison.
ANSWER:
b
126. __________ helps eliminate the obsession with grades and, instead, encourages employees to move to jobs they can
develop in their careers and add value to the organization.
a.
Red circling
b.
Broadbanding
c.
Pay ranging
d.
Factor comparison
ANSWER:
b
127. The description “G2 jobs include those classes of positions for which the duties are to be performed with minimal
supervision and little latitude for the exercise of independent judgment” is typical of that found in what type of job
evaluation system?
a.
Job ranking
b.
Job classification
c.
Point system
d.
Competency-based
ANSWER:
b
128. LennoCorp is using a job evaluation system in which they evaluate jobs by comparing their descriptions with
predetermined wage grades. While they appreciate the simplicity of this system, they want to switch to a system that is
more precise. LennoCorp should consider moving to what type of job evaluation system?
a.
Job ranking
b.
Job classification
c.
Point system
d.
Competency-based
ANSWER:
c
129. LennoCorp has identified leadership skills, responsibility, and communication as three key traits line managers must
possess. Each of those traits is divided into levels of difficulty. Those levels of difficulty are
a.
compensable factors.
b.
points.
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c.
weights.
d.
degrees.
ANSWER:
d
130. LennoCorp has identified leadership skills, responsibility, and communication as three key traits line managers must
possess. Leadership and communication each make up 35 percent, while responsibility makes up 30 percent of the
position. Those percents are
a.
compensable factors.
b.
points.
c.
weights.
d.
degrees.
ANSWER:
c
131. LennoCorp has spent a lot of time collecting wage and salary survey data from the relevant job markets for each of
its positions. They are most likely trying to maintain __________ equity.
a.
internal
b.
external
c.
individual
d.
union
ANSWER:
b
132. The Fair Labor Standards Act prohibits the employment of those between the ages of __________ in hazardous
occupations such as mining, logging, and meatpacking.
a.
14 and 21
b.
16 and 18
c.
16 and 21
d.
18 and 21
ANSWER:
b
133. A number of employees in the production department at LennoCorp have approached their supervisors to request
raises. They have said that colleagues who work in other departments at LennoCorp, but with the similar job titles and job
descriptions, receive a higher wage. How can LennoCorp ascertain the truth of this anecdotal evidence?
a.
Perform job evaluations
b.
Match the CPI
c.
Initiate escalator clauses
d.
Conduct wage and salary surveys
ANSWER:
a
134. LennoCorp captured information regarding the current rates paid for jobs in the firm and new rates based on a recent
job evaluation. This information was graphically represented in a scattergram known as a
a.
point system.
b.
pay grade.
c.
wage curve.
d.
job ranking system.
ANSWER:
c
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135. LennoCorp has spent a lot of time collecting wage and salary survey data from the relevant job markets for each of
its positions. At the same time, they have completed an extensive job evaluation of all positions. They are most likely
trying to maintain __________ equity.
a.
internal
b.
external
c.
internal and external
d.
individual and external
ANSWER:
c
136. A number of employees at LennoCorp have approached their supervisors to request raises. They have said that
colleagues who work for other companies in similar positions receive a higher wage. How can LennoCorp ascertain the
truth of this anecdotal evidence?
a.
Perform job evaluations
b.
Conduct wage and salary surveys
c.
Initiate escalator clauses
d.
Investigate the CPI
ANSWER:
b
137. The __________ collects and displays the results for all the measures that a company uses to monitor and compare
compensation among internal departments or units.
a.
red circle rate
b.
competence-based pay system
c.
compensation scorecard
d.
point system
ANSWER:
c
138. According to the compensation scorecard, functions with a compa ratio below __________ are considered to be
paying their employees below the company norm.
a.
25 percent
b.
50 percent
c.
75 percent
d.
100 percent
ANSWER:
d
139. The Fair Labor Standards Act permits employers to pay a “training wage” of __________ per hour for employees
younger than the age of twenty during their first ninety days of employment, provided their employment does not displace
other workers.
a.
$5.25
b.
$5.75
c.
$4.25
d.
$4.75
ANSWER:
c
140. A number of employees at LennoCorp have approached their supervisors to request raises. They have said that
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colleagues who work for other companies in similar positions receive a higher wage. In this situation, the employees are
seeking
a.
COLA.
b.
escalator clauses.
c.
external equity.
d.
individual equity.
ANSWER:
c
141. __________ may create problems for managers who wish to maintain pay secrecy among employees.
a.
NASDAQ information
b.
Internet salary survey data
c.
FLSA requirements
d.
Davis-Bacon standards
ANSWER:
b
142. Most pay increases may lack motivational value to employees when
a.
legality is questionable.
b.
they are too large.
c.
salary budgets are low.
d.
benefits are insignificant.
ANSWER:
c
143. When cost-of-living pay increases are given routinely, employees may view them as
a.
insults.
b.
entitlements.
c.
highly motivating.
d.
long overdue.
ANSWER:
b
144. Briefly discuss the motivating value of pay equity for employees.
ANSWER:
Simply defined, equity embraces the concept of fairness. Equity theory, also referred to as distributive
fairness, is a motivation theory that explains how people respond to situations in which they feel they have
received less (or more) than they deserve. A central point the theory makes is that individuals make
comparisons with people both inside and outside their organization, and that these comparisons influence
their motivation. In a work setting, individuals form a ratio of their inputs (abilities, skills, experiences) to
their outputs (salary, benefits). They then compare the value of that ratio with the value of the input/output
ratio for other individuals in a similar class of jobs either internal or external to the organization. If the
value of their ratio equals the value of another’s, they perceive the situation as equitable and no tension
exists. However, if they perceive their input/output ratio as inequitable relative to others’, this creates
tension and motivates them to eliminate or reduce the inequity. The strength of their motivation is
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Internal factors that influence wage rates are:
1. Compensation strategy of the organization
2. Worth of the job
3. Employee’s relative worth
4. Employer’s ability to pay
Major external factors that can influence wage rates are:
1. Labor market conditions
2. Area wage rates
3. Cost of living
4. Collective bargaining if the employer is unionized
5. Legal requirements
146. Discuss the factors necessary to successfully tie OKRs to compensation.
ANSWER:
If OKRs are tied to compensation, the following must be kept in mind.
1. Clarify expectations. If you intend to reward contributors who go above and beyond to complete their
objectives, you must first identify the criteria for outstanding performance versus just completing your OKRs
on time.
2. Balance aspirational with operational. Some OKRs can be big stretch goals while others can be simply
operational. Once you’ve determined how many of the goals were stretch from stuff that needed to be done,
you can determine a ratio and increase people’s performance based on work that they did that was a stretch.
3. Consider additional performance factors. Hitting your objectives demonstrates hard work, but they do not
cover everything that should be rewarded.
4. Drive collaboration, not competition. One of the biggest dangers that comes from rewarding people based
on reaching their OKRs is that they may focus too much on their individual OKRs at the expense of those of a
team or group.
147. Briefly discuss the main bases of compensation, including hourly, piecework, salaried, and exempt vs. nonexempt.
ANSWER:
Work performed in most private, public, and not-for-profit organizations has traditionally been compensated
based on hourly work. These employees are classified as hourly employees, or wage earners, and are normally
paid only for the time they work.
Piecework compensation, in which employees are paid according to the number of units they produce, is
another kind of compensation, though it is far less prevalent than hourly work as a basis for compensating
employees.
Those whose compensation is computed on the basis of weekly, biweekly, or monthly pay periods are
classified as salaried employees. Salaried employees, unlike hourly employees, are generally paid the same for
each pay period, even though they occasionally may work more hours or fewer than the regular number of
hours in a period. They also usually receive certain benefits not provided to hourly employees.
Another basis for compensation centers on whether employees are classified as nonexempt or exempt under
the Fair Labor Standards Act (FLSA). Nonexempt employees are covered by the act and must be paid at a rate
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